Study: Strong auto supplier M&A market through 2012

DETROIT (Sept. 26, 11:45 a.m. ET) — Merger and acquisition activity in the automotive supply base is expected to remain heated through 2012, according to PricewaterhouseCoopers LLP’s annual study of the supply chain.

PwC predicts about 270 global auto supplier deals in 2012 with a projected total value of $16 billion — similar to the 262 deals worth $16 billion in 2006.

There were 303 global auto supplier M&A deals in 2011 but at a value of only $10 billion.

The study, “Consolidation in the Global Automotive Supply Industry 2012,” says global automotive production is predicted to rise 40 percent by 2017, creating a buyer’s market for the supply base.

European automotive suppliers remain the biggest targets for M&A activity as the continent’s economy continues to stumble, the PwC study said.

“During the last 12 months, global auto suppliers, particularly from North America and China, have been targeting European competitors, predominately in powertrain subsystems,” Dietmar Ostermann, PwC’s global automotive advisory leader, said in a statement. “Auto executives should take a harder look at how the industry will continue to change, as leading suppliers will be expected to support global (automaker) platforms and participate in China’s large and continuously growing auto market, by serving both global (joint venture automakers) and domestic Chinese automakers.”

M&A activity among powertrain suppliers leads all supplier technologies this year, representing 26 percent of all deals globally. Powertrain represents 56 percent of all deals by Chinese companies for the year to date.

Of the 350 global powertrain suppliers covered in the study, 60 are “strong buyers” and 55 “strong divestors and distressed candidates,” according to the study.

Chassis suppliers rank second in PwC’s study with 314 global suppliers, 60 of which are strong buyers and 42 strong divestors.

The study also found that North American, European, Japanese and South Korean suppliers have not returned to pre-recession capital investment — the amount a company spends on fixed or other assets for future gain. Capital investment as a percentage of sales was 4.1 percent in 2011 for PwC’s top global 100 suppliers, compared with 5.1 percent in 2008.

Comparatively, for Chinese suppliers, capital investment spending as a percentage of revenue was 7.1 percent in 2011.